1  Liberalized Policy for NRI investments- entities owned and controlled by NRI’s will be treated as at par with NRI’s for investment in India

I.  Foreign Exchange Management (Transfer or Issue of Security By A person Resident Outside India) Regulations, 2000, under Clause 3(ii) provides that “A NRI may purchase shares or convertible debentures of an Indian Company on non-repatriation basis other than under Portfolio Investment Scheme subject to the terms and conditions specified in Schedule 4”

II.    Press Note No.7 (2015 series) dated June 3, 2015 has clarified that investments by NRI’s under schedule 4 of the aforesaid FEMA regulation will be deemed to be domestic investment at par with the investments made by residents.

III.  A corresponding press release by the Press information Bureau dated May 21, 2015 has further elaborated as under :

“since the investment made under schedule 4 are on non-repatriable basis, it needs to be clearly provided that such investments, for the purposes of FDI Policy are domestic investments. This will enable investments by NRI’s, OCI cardholders and PIO cardholders under schedule 4 on non-repatriation basis, across sectors without being subjected to any of the conditions associated to foreign investments.

IV.     Furthermore, with a view to further liberalize the Policy on NRI investments, the Government of India vide Press  Note dated November 10, 2015 (http://dipp.nic.in/English/acts_rules/Press_Notes/pn12_2015.pdf), under item no.6 of the Annexure lays down as under:

‘In order to attract larger investments, which are possible through incorporated entities only, the special dispensation of NRI’s has now also been extended to companies, trust and partnership firms, which are incorporated outside India and are owned and controlled by NRI’s. Henceforth, such entities owned and controlled by NRI’s will be treated as at par with NRI’s for investment in India.’

V.       The term control has been defined under clause 2.1.7 of the Policy and reads as under:

‘Control’ shall include the right to appoint the majority of the directors or to control the management or policy decisions including by virtue of the shareholding or management rights or shareholders agreements or voting agreements.

As such, any investment in India through a wholly owned subsidiary in India or by the NRI shareholders directly, would be covered under the liberalized FDI Policy on NRI investment and investment would be treated at par with domestic investments and would not be subject to any of the conditions associated with foreign investments.